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Navigating The Choices

Tax planning is not regulated by the financial conduct authority.

You now have far more freedom in how you use your retirement savings.

However, this freedom of choice can have implications if you get it wrong. For example, you may create a large tax bill that you wouldn’t otherwise have had. Also, not all your pension plans may allow this new freedom of choice. You may have to move the money to an environment that does allow it. This might be a good thing to do; it might just as easily be a bad thing.

You can avoid getting it wrong with the right advice.

Taking a tax-free lump sum

You can take 25% of your pension fund as a lump sum, completely tax free. This hasn’t changed and has been this way for many years.

Creating a retirement income

There are two ways you can use your pension to do this: buy an annuity or invest in flexi-access drawdown.


An annuity will pay you an income until you die. Guaranteed. This is the annuity’s big advantage and makes it the starting point for all your retirement planning.

We believe it’s essential for you to receive a regular income to cover your day-to-day expenses. However, guarantees come at a cost.

The amount of income an annuity pays you depends on two things: the size of your pension fund, and how long you might live based on how old you are now. So the older you are the more income you will receive. Your annuity payments form part of your total taxable income and incur income tax.

You can also choose what type of annuity you have:

  • One that pays you a guaranteed income until you die and then stops or
  • One that pays you a guaranteed income until you die and then continues to your surviving spouse or dependant
  • One that stops paying as soon as you die or
  • One that guarantees to pay out for a minimum time, for example five years, even if you die earlier
  • One where the income stays the same or
  • One where the income increases each year.
Guide to Retirement Download

The value of pensions and investments can fall as well as rise, you may get back less than you invested.